- The fraud trial against the former CEO of Barclays and three other senior directors or executives began in London Wednesday. The defendants, including former CEO John Varley, and three co-workers Roger Jenkins, Thomas Kalaris, and Richard Boath, have all pleaded not guilty to all charges.
- It’s the biggest trial for the British finance industry since the financial crisis. It relates to fundraising activities by the bank in 2008 with Qatar during the crisis.
- Prosecutors allege that the bosses entered into dishonest mechanisms with Qatar to secretly pay out commissions and secure capital injections, to avoid a bailout from the UK Government.
The opening of one of the most important trials in recent British finance history got underway on Wednesday in London with allegations that former Barclays bosses – including its CEO – entered into dishonest agreements to avoid a government bailout.
The defendants, including former CEO John Varley, and three co-workers Roger Jenkins, Thomas Kalaris, and Richard Boath, all deny conspiracy to commit fraud by false representation. Varley and Jenkins deny a second charge of fraud.
It’s the first UK jury trial which alleges wrongdoing related to the financial crisis. The crisis threatened to collapse the global banking system, and several banks actually went under, including Lehman Brothers, Bear Stearns, and Northern Rock.
Other UK lenders were forced to take funding bailouts from the government in order to meet their capital ratios – the metric on which a bank’s stability is judged. But former Barclays’ executives activity in raising capital privately from Qatari investors was later investigated for alleged fraud.
The Qatari companies, Qatar Investment Authority and Qatar Holdings, invested £6 billion ($US7.8 billion) in Barclays during capital-raising activities in 2008.
“Those agreements were in truth not genuine agreements for services,” said Ed Brown, a prosecutor for the UK Serious Fraud Office (SFO). “They were dishonest mechanisms to hide additional fees being paid to the Qataris for their investment.”
Barclays paid £322 million in additional fees to the Qataris, according to Brown. These fees came in the form of two separate “advisory services agreements” (ASAs) of £42 million and £280 million, respectively.
“The ASA fees were in reality subscription fees or commissions, said Brown. “The ASA fees were, and remained, payments for the Qataris’ agreement to invest. The ASAs were no more than mechanisms for the disguised payment of additional subscription fees and/or hidden discounts from the ostensible price paid by Qatar/Challenger for their investments.”
Judge Robert Jay is overseeing the trial, which is expected to last six months at London’s Southwark Crown Court.